The Importance of Tuition Reimbursement Program for Employers

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Cost is a critical factor that employers should consider when financing a tuition reimbursement programs for their employees. It is because the cost can have an impact on the bottom line of organizations. Therefore, companies should do a trade-off between the tuition costs and the expected benefits. Over the long-term, financing a tuition reimbursement program is likely to benefit organizations because of the increase in productivity of the workforce, more trust and loyalty from employees, and more job satisfaction. Employers can also use the tuition reimbursement policy as a valuable recruitment tool to attract high-caliber employees.

For the case of Fells Wargo bank, we will analyze the tuition fee for three universities and then determine the university to pick. Some of the factors to consider in selecting the university where the employees will pursue the MBA programs are the tuition costs and the ranking of the university, and the proximity and convenience of the universities offering the MBA.

In this case, we consider the MBA tuition fees for some three universities. We assume that most employees will be attending the MBA programs on a full-time basis. The cost of MBA tuition for Stanford University is $ 68868 (Stanford Business School, 2017). The fees for Yale for the same program is $ 66,650 (Yale School of Management, 2017). The 2019 MBA tuition fees for Harvard University is $ 72000 (Harvard Business School, 2018). The Fells Wargo Bank should consider many factors such as cost to arrive at the university that the cost projections will be based on. We select Harvard University because it is the top-ranked MBA school in 2017 (US News, 2017). The number of employees in Fells Wargo Bank is 269000, of which approximately 60% are eligible for the MBA program. From the figures, the number of employees eligible for the program is:

60% 269000= 161400 employees.

However, the reality is that not all the eligible employees will be interested in pursuing the program. Therefore, we assume that 10% of the eligible employees will actually enroll for the part-time MBA program. This gives the number of employees as 10% 161400= 16140 employees.

Therefore, the estimate of the annual tuition costs for the employees will be based on our assumption of 16140 employees. Since the annual cost in for the full-time 2019 MBA program at Harvard University is $ 72000, the total annual cost for the 16140 employees is as follows:

Total annual cost= 7200016140= $ 1162080000, which we assume to be the cost in 2019.

This is the cost for this year. We do the projections for the next 5 years. Assuming that the annual tuition costs increase at the rate of 4% compounded annually, the projections are as follows:

Year

Tuition Cost in dollars (to the nearest dollar)

2019

1162080000

2020

11620800001.04= 1208563200

2021

1162080000= 1256905728

2022

1162080000= 1307181957

2023

1162080000=1359469235

2024

1162080000=1413848005

We assume that the company will make full reimbursement for the tuition fees outlined above. The table, therefore, gives the total cost the company will incur per year in the program. Fell Wargo bank should therefore incorporate that cost in its financial statements and it should indicate it as a budget.

ACTIVITY 4: MAKE THE PITCH

Fells Wargo Bank can benefit immensely from MBA tuition reimbursement programs for its employees. Over the medium and long-term, the benefits are likely to outweigh the costs and improve the position of the bank in the market by generating even greater profits and building a superior brand name.

The policy can be a strategy of attracting and retaining employees (Manchester, 2012; Pattie, 2006). In a corporate world where employees constantly switch jobs, the tuition reimbursement policy will ensure that most employees remain within the company during and after completing the program. It would be important because of the high-level of competition within banks. Therefore, the bank will gain a recruiting edge over its competitors and attract star talent to spearhead its activities (Pattie, 2006). It would be beneficial to the company because it would not need to train new employees after the old employees leave it for other ventures. Fells Wargo can and the employees can sign contracts that ensure they remain within the company for a certain period. For instance, the contract may stipulate that they remain with the bank at least five years after completing their MBA programs.

Another benefit is a knowledgeable workforce. Education increases the level of workers’ skills, which ultimately leads to improved employee performance (Manchester, 2012). It would eventually ensure that the company posts bigger profits because of a skilled workforce. The MBA program is relevant to the banking industry and therefore Fells Wargo Bank would benefit from the specialties within MBA that its employees pursue. For instance, the bank will assign those who pursue MBA Finance to such roles as credit risk management, and asset management (Simpson, 2000). This will save the company the costs of hiring a consultant or an employee from another company, which may be expensive. Therefore, the financial benefits to the company of the tuition reimbursement proposal would most likely exceed the costs. The bank can hence increase its profitability and other areas of financial performance. A related benefit is that the knowledge that employees will gain from the MBA program will make them sound decisions that may indirectly benefit the company. For instance, they will learn prudent financial management skills such as savings and investments. It would save the company from the loss that it could incur due to poor decisions of the employees. The sense of accomplishment of those who have done the MBA would increase and hence their performance because they do want to portray the image that their MBA program has increased their self-worth.

The company will also benefit by having a good brand name. The motivated employees may offer superior services to the customers because of their happiness and loyalty to the company (Pattie, 2006). Great customer service will likely help the bank retain its customers and possibly attract others. The customers always feel the effect of any good company policy. Therefore, the bank would benefit by increasing its customer base, which would eventually enhance the brand name of the bank within the banking industry. The perception among customers may lead to increasing share price and hence the market capitalization of the company will increase. The volume of the trade of the bank shares is also likely to increase.

ACTIVITY 5: DRAFT PROPOSAL

Contents

Overview of the organization

The name of the organization

The Workforce Eligible Participants

The Costs

The estimated number of Employees for the program

The tuition cost per employee

The total costs of the program

The Pitch

Attracting and retaining employees

Knowledgeable workforce

Building a brand name

EXECUTIVE SUMMARY

The name of the organization is Fells Wargo Bank. It is a large bank with many branches. The number of employees in the company is 269000, of which 60% (161400) are eligible for an MBA program.

Fells Wargo has to estimate from past records the number of employees that are likely to enroll in the MBA program out of those eligible. The estimate is that 10% of the eligible will enroll. The number translates to approximately 16140 employees. The tuition fees for 2019 for the MBA program at Harvard University is $ 72000. The total cost is, therefore, $ 1162080000. We do projections for the next 5 years assuming that the tuition fees increase by 4% annually. Therefore, the tuition fees for 2020, 2021, 2022, 2023, and 2024 are $1208563200,$ 1256905728, $1307181957 , $1359469235 , and $1413848005, respectively. It will become a budget item for the company.

Numerous benefits accrue to Fells Wargo Bank if it implements the tuition reimbursement program. It includes employee loyalty, more productivity, a good brand name, and increased financial performance.

ACTIVITY 6: FINAL PROPOSAL

Fells Wargo will benefit immensely from implementing the tuition reimbursement program for its employees. The company may adopt the reimbursement for part-time MBA programs due to the high cost of the full programs. This way, many employees are set to benefit with less financial commitments by the bank if it were to finance the full MBA program. It will ensure that even as employees pursue their MBAs, they still have time to work for the company. The estimate of the number of employees who would enroll for the program is 16140 employees. The figure may vary, and the company should have in place extra funds should the number of employees interested exceed 16140. The total cost at Harvard University for the 2019 MBA program will be $1162080000, which the company should pay for in full. It should include it in the preliminary budget and adjust it accordingly when the actual number of employees is known.

The program will likely bring many benefits to the bank. It will have a more learned workforce, the employee loyalty will improve, it will attract skilled staff, and its brand name will grow due to better services to clients. Many customers will join the bank due to increased efficiency of the bank because of a highly skilled workforce. Therefore, it will perform better than its competitors in the banking and financial services industry. Ultimately, the company will have better financial performance using indicators such as profitability, share price, market capitalization, and have a competitive edge in the banking and financial services industry (Manchester, 2012). In the highly competitive banking and financial services environment, it is critical that Fells Wargo take up any opportunity that would give it an edge, and the MBA tuition reimbursement program is one such opportunity.

References

Harvard Business School (2018). MBA class of 2019 cost of attendance. Retrieved from https://www.hbs.edu/mba/financial-aid/tuition-assistance/Pages/cost-of-attendance.aspx

Manchester, C.F. (2012). General human capital and employee mobility: How tuition reimbursement increases retention through sorting and participation. ILR Review, 65(4), 951-974.

Pattie, M. (2006). Tuition reimbursement, perceived organizational support, and turnover intention among graduate business school students. Human Resource Development Quarterly, 17(4), 423-442.

Simpson, R. (2000). Winners and losers: Who benefits most from the MBA? Management Learning, 31(3), 331-351.

Stanford Graduate School of Business (2017). Cost summary. Retrieved from https://www.gsb.stanford.edu/programs/mba/financial-aid/cost-summary

US News (2017). Best business schools. Retrieved from https://www.usnews.com/best-graduate-schools/top-business-schools/mba-rankings

Yale School of Management (2017). Cost information. Retrieved from https://som.yale.edu/programs/mba/admissions/financing-your-mba/tuition-cost

January 19, 2024
Category:

Business Economics

Subcategory:

Corporations Finance

Subject area:

Company

Number of pages

6

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1633

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